3.3 costs and revenue Flashcards
(28 cards)
What are costs in a business context?
Costs are expenses that a business has to pay to engage in its trading activities.
What are fixed costs?
Fixed costs do not change when a business alters its level of output, such as rent.
What are variable costs?
Variable costs alter directly with the level of a firm’s output; increasing output leads to higher variable costs.
How is total cost calculated?
Total costs = total fixed costs + total variable costs.
What are direct costs?
Direct costs can be related to the production of a particular product and vary directly with the level of output.
What are indirect costs?
Indirect costs are overheads that cannot be allocated to the production of a particular product and relate to the business as a whole.
What are revenue streams?
Revenue streams are a business’s earnings from its full range of trading activities, including renting assets.
What is total revenue?
Total revenue is the income a business earns from all of its activities added together.
How is profit defined?
Profit is the extent to which a business’s total revenue exceeds its total costs over a period of trading.
How is a loss defined?
A loss is the amount by which a business’s total costs exceed its total revenue over a period of trading.
What is the formula for calculating profit or loss?
Profit (or loss) = total revenue − total costs.
What is the difference between direct and indirect costs?
Direct costs are tied to specific products and vary with output, while indirect costs are general overheads not tied to specific products.
Can fixed costs change with production levels?
No, fixed costs do not change regardless of production levels.
What happens to variable costs when a firm reduces its output?
Variable costs are likely to fall when a firm reduces its output.
What are some examples of revenue streams?
Examples include dividends, advertising revenue, donations, earnings from bank deposits, subscription fees, merchandise, and sponsorship.
What is the relationship between total revenue and total costs in determining profit?
Profit occurs when total revenue exceeds total costs.
What is the significance of classifying costs as fixed or variable?
Classifying costs helps businesses understand their expenses and manage their pricing and production strategies.
What are revenue streams?
Revenue streams are a business’s earnings from its full range of trading activities, including renting assets.
What is total revenue?
Total revenue is the income a business earns from all of its activities added together.
How is profit defined?
Profit is the extent to which a business’s total revenue exceeds its total costs over a period of trading.
How is a loss defined?
A loss is the amount by which a business’s total costs exceed its total revenue over a period of trading.
What is the formula for calculating profit or loss?
Profit (or loss) = total revenue − total costs.
What is the difference between direct and indirect costs?
Direct costs are tied to specific products and vary with output, while indirect costs are general overheads not tied to specific products.
Can fixed costs change with production levels?
No, fixed costs do not change regardless of production levels.
